Rule allowing Indian companies to list overseas comes into force

Following earlier announcements made by Finance Minister Nirmala Sitharaman, the Ministry of Corporate Affairs has issued a notification stating that the new amendment in the Companies Act, 2020 has come into force with effect from October 30.

The government has made amendments in Section 23 of the Act to state that "such class of public companies may issue such class of securities for the purposes of listing on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed."

The amendments provide public companies the flexibility to list their securities on foreign stock exchanges and also include provisions for exemptions by the central government.


The provisions for direct overseas listing were approved by the government, as part of the Covid relief package announced in May 2020.

"A direct listing of securities by domestic companies will now be permissible in foreign jurisdictions. I'm also pleased to announce that the government has taken a decision to enable the direct listing of listed and unlisted companies on the IFSC exchange. So, this is a major step forward. This will facilitate access to global capital and better valuation," Nirmala Sitharaman had said earlier in July.

It was earlier reported that the government plans to first begin with allowing direct listing at IFSC GIFT City before permitting listing at foreign stock exchanges.

A direct listing abroad would help Indian companies attract a large and diverse pool of capital, and improve corporate governance as well as the benefits of dollar-denominated trades which enables investors to save hedging and currency conversion costs.

"This should also help the government's plan to reverse flip holding structures of Indian companies as well. Notification from the MCA is now awaited for the class of securities that public companies will be permitted to issue in permitted foreign jurisdictions," Abhimanyu Bhattacharya, Partner at Khaitan & Co, said.

Existing market norms mandate a domestic firm looking for an overseas float to make a secondary listing on the domestic equity bourses or first go for a domestic float. Overseas listings by domestically listed entities are at present carried out through American

Depository Receipts (ADRs) and Global Depository Receipts (GDRs), which companies like Infosys and Wipro have done.
The new policy could be a shot in the arm for startups looking to raise funds from public markets but outside of the country.

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